Alberta Municipalities says provincial budget falls short on infrastructure spending support

Alberta municipal leaders says the latest provincial budget has good news for cities and towns but a pool for capital projects should have had a higher baseline.

Cathy Heron, mayor of St. Albert and head of Alberta Municipalities, says that while many important projects are being funded by the province — hospitals, roads, bridges — they're only a small fraction of the bigger picture for infrastructure.

"As we continue to grow as a province, if we don't have an investment into the municipal infrastructure, I think it will be very noticeable that we are not providing the quality of life that we need to grow this province," Heron said at a news conference Wednesday. 

Since 2007, one source of funding for municipalities to turn to has been capital grants from the provincial Municipal Sustainability Initiative (MSI). Each municipality received a share based on a formula of pools determined by the province.

That's changing this year as Alberta replaces the MSI with the Local Government Fiscal Framework (LGFF). After the first year, the capital pool increases based on provincial revenue changes indexed to three years prior, meaning municipalities can predict and plan for their funding amount ahead of time.

However, the government is still working on finalizing the share allocation formula for most municipalities, though Edmonton and Calgary have already been set.

Legislation for the LGFF was introduced in 2019. In 2021, the government decided to delay its implementation and stretch out the remaining MSI funding — shrinking the capital pot to $485 million for each of 2022-23 and 2023-24.

Before that cut, capital funding underneath the MSI umbrella varied:

• $1.1 billion in 2016-17
• $1.9 billion in 2017-18
• $634 million in 2018-19
• $641 million in 2019-20
• $963 million in 2020-21
• $1.2 billion in 2021-22

In 2024-25, the first year of the LGFF, the amount is pegged at $722 million.

"Municipalities are going to have to be very creative on how they fund their next projects," Heron said, adding that collaboration may be part of that creativity.

"Because we don't have the money, honestly, and we don't want to see property taxes going up because with increased property taxes comes affordability issues for Albertans."

Alberta Municipalities intends to press the government to commit to additional strategic infrastructure spending.

Alex Puddifant, spokesperson for the Minister of Municipal Affairs, said in an emailed statement the government is investing more than $2 billion over three years as they prepare to transition to the LGFF.

"We front-loaded MSI funding for municipalities in 2021, and on average over the last three years, we have provided $722 million per year. This is a total three-year investment of more than $2 billion," he said, noting the LGFF is projected to increase to $813 million in 2025-26.

"We're providing fair, predictable and constituent funding to municipalities while ensuring that we bring municipal spending in line with comparator provinces as was recommended by the MacKinnon report," he added, referring to the 2019 recommendations of a panel, led by former Saskatchewan finance minister Janice MacKinnon, that studied Alberta's finances

Operating increase, revenue index

Except for Edmonton and Calgary, municipalities also receive operating grants each year under the MSI and now LGFF. Budget 2023 promises to double that pool from $30 to $60 million.

"The operating money is a surprise and a good news story for us," Heron said.

In line with a request from Alberta Municipalities, the budget if passed will increase the revenue index factor built into the LGFF from 50 to 100 per cent. That means if provincial revenues were to increase by 10 per cent, the LGFF grows by that same factor.

Budget 2023 promises that the government will provide additional top-up funding so that municipalities do not see a year-over-year decrease in the shift to the LGFF.